Product liability insurance protects businesses from the financial risks associated with claims involving injury or damage caused by their products. If a business is found to be liable for product liability claims, the insurer agrees to cover the costs of defending against those claims and paying damages.
What are the duties of insured under product liability insurance?
Under a product liability policy, the insured is responsible for the following:
Duty to cooperate
It is the insured's responsibility to cooperate with the insurer during the investigation and settlement of claims. This includes providing all required information and documents and participating in any legal proceedings.
Duty to Notify
A claim or lawsuit against the insured must be reported promptly to the insurer. If this isn't done, the coverage may be refused.
Duty to Mitigate
Taking reasonable measures to mitigate any damage or loss resulting from their products is an important duty of the insured. This may include recalling or repairing defective products, issuing warnings, or taking other corrective measures.
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Duty to Maintain Records
The insureds must keep accurate and complete records about their products, including the manufacturing process and quality control measures.
Duty to Comply with Laws and Regulations
Manufacturers, distributors, and retailers must comply with all the laws and regulations relating to the manufacturing, distribution and sale of their products. However, the specifics of each policy may differ. Therefore, the insureds should carefully review their policy and understand their obligations to the insurer to ensure that they are adequately protected.
Case Study
ABC Medicare manufactures medical devices used in hospitals and clinics. The company purchases product liability insurance to protect itself against claims made by customers who have been injured or have faced damages using the company's products. It covers up to Rs 15 lakh in a single occurrence and up to Rs 30 lakh in a total for all occurrences during the policy period. The following duties must be fulfilled by ABC Corporation to ensure that the company is adequately protected under the policy.
Notification of Claims to Insurance Companies
It is ABC Medicare’s responsibility to notify its insurance company promptly of any claims made against it, regardless of whether the claim appears to be unfounded or frivolous. Failure to notify the insurer could result in the denial of coverage.
Duty to provide correct information
The company must provide the insurance company with accurate and complete information about its products, including information about how they are designed, manufactured, and distributed, as well as any known risks associated with their use.
Duty to cooperate with the insurance company
If ABC Medicare receives a claim, it must cooperate with the insurance company in investigating and defending the claim. Providing all necessary documents and information about the claim, as well as allowing the insurance company to inspect the products, are all part of the process.
Duty to mitigate damages
If a claim is made against ABC Medicare, the company must take all reasonable steps to mitigate any damages caused by the claim. It may include recalling or repairing defective products or providing compensation to injured parties.
Duty to Comply with Policy terms and conditions
The final requirement of ABC medicare product liability insurance policy is to comply with all its terms and conditions. The insurance company requires that customers pay their premiums on time, inform them of any changes to their business operations or products, and follow the policy's risk management requirements.
Conclusion
It is important for businesses to understand their responsibilities under product liability insurance. Having a product liability insurance does not mean the company can act carelessly. To ensure that their claims are covered by liability insurance, the insured needs to inform, cooperate, mitigate damages, and maintain records.
